How Does Price Innovation Happen in Private Jet Travel?
The private jet business can lower prices with innovations at several levels:
- New Technology Aircraft: More efficient aircraft with lower fixed and variable operating costs
- Better Utilization of Aircraft: Spread the fixed costs over more flights
- Better Utilization of Empty Flights (Empty Legs): Eliminate the wasted seats – or spoilage as our airline friends define it
- Reduced cost of SG&A expense though more effective marketing and use of technology: Lower overhead and marketing expenses translate into the ability to sell the same product / service at a lower price while achieving the same or even better margins
- More efficient government oversight: Too much of the time spent dealing with the regulatory oversight of the FAA is wasted on issues that don’t drive safety to a higher level.
Achieving innovation in any or all of these areas listed can impact price; but, it doesn’t come easy. Innovation is hard work. Aggressive innovation in any one of these areas could have a solid impact on price, but innovation of all of these areas could have a dramatic impact - a dramatic impact that will create the new market. This is basic capitalism at it best.
The innovation in aircraft production is here. And it will continue to get better. The technology and tools exist to innovate in all of these areas. The question we must ask ourselves is this: Do we have the determination and discipline to go through the hard work of innovation? And the answer must be “yes”, for if we don’t, someone else will.
Each of these areas mentioned merit a further discussion. Let me know what you think on innovation and come back again for more Plane Conversations.
The new economic realities have forced many charter operators to completely rethink their business plans. As the fractional idea fades in light of the fixed costs involved, greater expansion in the use of “jet cards” and more traditional “on demand charter” have become more common.
Trying to reduce the fixed and variable cost structure represents a formidable challenge these days. While new technology aircraft can reduce costs with aircraft utilization and efficency the more complicated systems they bring with them, and higher MX costs (if not under warranty) make offset those reductions. Many charter operators are also turning to the use of fuel contracts to avoid paying higher spot prices, especially with the current fuel volitility.
As for eliminating the “dead head” legs. Many charter and fractional operators have, with varying degrees of success, used “preferred positioning programs” to make sure that each leg flown creates revenue. For small operators, this may not be cost efficent, but for multiple airplane operators, through the use of software scheduling programs. The “dead head” cost can be greatly reduced, though it still accounts for a significant overhead cost.
By far, one of the easiest way to save on the advertising costs, is the use of social media. Many charter operators have already turned to Twitter to highlight empty leg and route discounts and overall exposure for their business. Since Twitter is currently free, the return on even one sold leg is 100 percent. Other markeing ideas can generate free publicity such as being part of community events and organizations or being an active part AvBusiness organizations. Such relationships MAY result in national exposure which is invaluable.